ASC 606: IT audit considerations
WHITE PAPER |
The effective date for the Financial Accounting Standards Board’s new revenue standard, codified in ASC 606, for many public companies was Jan. 1, 2018, and the effective date for remaining public companies and many private companies is fast approaching. Significant changes in internal control over financial reporting (ICFR) are expected for companies adopting ASC 606, particularly in regard to accounting and enterprise resource planning (ERP) systems.
The new revenue recognition steps, accounting changes and disclosure requirements will significantly affect the manner in which entities capture and analyze information related to transactions with customers. These changes will necessarily cause changes in internal control at all entities. In addition, legacy accounting and ERP systems may not be suited to the new standard, as not all required information will be readily available or necessarily reliable. The increased level of management judgment required under the new standard will introduce new risks of material misstatement and control objectives for internal and external auditors.
This white paper addresses key items related to implementation of the new standard and its impact on ICFR and accounting systems as they relate to internal and external IT auditors. Additional information on ASC 606 can be found in our revenue recognition guide, as well as in RSM’s Revenue Recognition Resource Center.